Chapter 10: Partnerships: Termination and Liquidation Flashcards
(35 cards)
When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:
A. declare personal bankruptcy.
B. initiate legal proceedings against the partnership.
C. contribute cash to the partnership.
D. deliver a note payable to the partnership with specific payment terms.
E. None of the above. The partner has no legal responsibility to cover the capital deficit balance.
C. contribute cash to the partnership.
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash: 16,000
Noncash assets 434,000
Total 450,000
Liabilities 150,000
Abrams, capital 80,000
Bartle, capital 90,000
creighton, capital 130,000
Total 450,000
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.
If the noncash assets were sold for $234,000, what amount of the loss would have been allocated to Bartle?
A. $43,200.
B. $46,800.
C. $40,000.
D. $42,400.
E. $43,100.
C. $40,000.
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash: 16,000
Noncash assets 434,000
Total 450,000
Liabilities 150,000
Abrams, capital 80,000
Bartle, capital 90,000
creighton, capital 130,000
Total 450,000
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.
The noncash assets were sold for $134,000. Which partner(s) would have had to contribute assets to the partnership to cover a deficit in his or her capital account?
A. Abrams.
B. Bartle.
C. Creighton.
D. Abrams and Creighton.
E. Abrams and Bartle.
D. Abrams and Creighton.
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash: 16,000
Noncash assets 434,000
Total 450,000
Liabilities 150,000
Abrams, capital 80,000
Bartle, capital 90,000
creighton, capital 130,000
Total 450,000
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000.
After the liquidation expenses of $12,000 were paid and the noncash assets sold, Creighton had a deficit of $8,000. For what amount were the noncash assets sold?
A. $170,000.
B. $264,000.
C. $158,000.
D. $146,000.
E. $185,000.
A. $170,000.
The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:
Cash: 10,000
Noncash assets 300,000
Total 310,000
Liabilities 130,000 Keaton, capital 60,000 Lewis, capital 40,000 Meador, capital 80,000 Total 310,000
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000.
Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets?
A. $38,000.
B. $30,000.
C. $24,000.
D. $34,000.
E. $31,600.
B. $30,000.
The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:
Cash: 100,000
Noncash assets 210,000
Total 310,000
Liabilities 40,000 Keaton, capital 90,000 Lewis, capital 60,000 Meador, capital 120,000 Total 310,000
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $60,000. How much will each partner receive in the liquidation?
Keaton Lewis Meador
A. 40,000 26,667 53,333
B. 24,000 48,000 48,000
C. 60,000 0 60,000
D. 0 0 120,000
E. 36,000 12,000 72,000
Keaton Lewis Meador
C. 60,000 0 60,000
The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:
Cash: 100,000
Noncash assets 210,000
Total 310,000
Liabilities 40,000 Keaton, capital 90,000 Lewis, capital 60,000 Meador, capital 120,000 Total 310,000
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels confident it will be able to eventually sell the noncash assets and wants to distribute some cash before paying liabilities. How much would each partner receive of a total $60,000 distribution of cash?
Keaton Lewis Meador A. 40,000 0 20,000 B. 12,000 24,000 24,000 C. 20,000 13,333 26,667 D. 60,000 0 0 E. 10,000 0 50,000
Keaton Lewis Meador
A. 40,000 0 20,000
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Cash: 90,000
Noncash assets 300,000
Total 390,000
Liabilities 60,000 Henry, capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total 390,000
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.
What amount of cash was available for safe payments, based on the above information? A. $30,000. B. $85,000. C. $25,000. D. $35,000. E. $40,000.
C. $25,000.
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Cash: 90,000
Noncash assets 300,000
Total 390,000
Liabilities 60,000 Henry, capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total 390,000
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the amount of safe cash payments be distributed?
A. In a ratio of 2:4:4 among all the partners.
B. $18,333 to Henry and $16,667 to Jacobs.
C. In a ratio of 1:2 between Henry and Jacobs.
D. $15,000 to Henry and $10,000 to Jacobs.
E. $21,667 to Henry and $3,333 to Jacobs.
D. $15,000 to Henry and $10,000 to Jacobs.
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Cash: 90,000
Noncash assets 300,000
Total 390,000
Liabilities 60,000 Henry, capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total 390,000
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000, and the liquidation expenses of $5,000 were paid. How much of the $120,000 would be distributed to the partners? (Hint: Either a predistribution plan or a schedule of safe payments would be appropriate for solving this item.)
Henry Isaac Jacobs A. 33,000 36,000 51,000 B. 28,000 36,000 56,000 C. 29,333 32,000 58,667 D. 24,000 48,000 48,000 E. 38,000 26,000 56,000
Henry Isaac Jacobs
B. 28,000 36,000 56,000
The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation:
Cash: 90,000
Noncash assets 300,000
Total 390,000
Liabilities 170,000 Perry capital 70,000 Quincy, capital 50,000 Renquist, capital 110,000 Total 390,000
Inlcuded in Perry’s capital balance is a $20,000 partnership loan owed to Perry. Perry, Quincy, and Renquist shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $15,000.
All partners were solvent.
What amount would noncash assets need to be sold for in order for any partner to receive some cash? A. $185,000 B. $170,000 C. $165,000 D. $95,000 E. $90,000
D. $95,000
The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation:
Cash: 90,000
Noncash assets 300,000
Total 390,000
Liabilities 170,000 Perry capital 70,000 Quincy, capital 50,000 Renquist, capital 110,000 Total 390,000
Inlcuded in Perry’s capital balance is a $20,000 partnership loan owed to Perry. Perry, Quincy, and Renquist shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $15,000.
All partners were solvent.
What would be the minimum amount for which the noncash assets must have been sold, in order for Quincy to receive some cash from the liquidation? A. Any amount in excess of $170,000. B. Any amount in excess of $190,000. C. Any amount in excess of $260,000. D. Any amount in excess of $280,000. E. Any amount in excess of $300,000.
B. Any amount in excess of $190,000.
A local partnership was in the process of liquidating and reported the following capital balances:
Justice, Capital (40% share of all profits and loss $23,000
Zobart, capital (35%) 22,000
Douglass, Capital (25%) 14,000
Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then in the cash account.
How much of this money should Justice receive? A. $15,467. B. $15,533. C. $17,333. D. $16,533. E. $15,867.
B. $15,533.
A local partnership was in the process of liquidating and reported the following capital balances:
Justice, Capital (40% share of all profits and loss $23,000
Zobart, capital (35%) 22,000
Douglass, Capital (25%) 14,000
Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then in the cash account.
How much of this money should Zobart receive? A. $15,467. B. $14,467. C. $17,333. D. $15,633. E. $15,867.
A. $15,467.
A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, Capital $60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
Creditors of partner Ding filed a $25,000 claim against the partnership’s assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold for $228,000, what is the minimum amount that Ding's creditors would have received? A. $36,000. B. $0. C. $2,500. D. $38,720. E. $67,250.
C. $2,500.
A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, Capital $60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
Creditors of partner Ding filed a $25,000 claim against the partnership’s assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold for $228,000, what is the minimum amount that Laurel's creditors would have received? A. $36,000. B. $0. C. $2,500. D. $38,250. E. $67,250.
D. $38,250.
A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, Capital $60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
Creditors of partner Ding filed a $25,000 claim against the partnership’s assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold for $228,000, what is the minimum amount that Ezzard's creditors would have received? A. $36,000. B. $0. C. $2,500. D. $38,250. E. $67,250.
B. $0.
A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, Capital $60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
Creditors of partner Ding filed a $25,000 claim against the partnership’s assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold, for $228,000 what is the minimum amount that Tillman's creditors would have received? A. $36,000. B. $0. C. $2,500. D. $38,250. E. $67,250.
E. $67,250.
. Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:
Dancey, Capital $72,000
Reese, capital 32,000
Newman, capital 52,000
Jahn, capital 24,000
Which one of the following statements is true for a predistribution plan?
A. The first available $16,000 would go to Newman.
B. The first available $20,000 would go to Dancey.
C. The first available $8,000 would go to Jahn.
D. The first available $8,000 would go to Newman.
E. The first available $4,000 would go to Jahn.
A. The first available $16,000 would go to Newman.
Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:
Dancey, Capital $72,000
Reese, capital 32,000
Newman, capital 52,000
Jahn, capital 24,000
Which one of the following statements is true for a predistribution plan?
A. The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments equally.
B. The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios.
C. The first $20,000 would go to Newman. The next $8,000 would go to Dancey. The next $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $40,000 before all four partners share any further payments equally.
D. The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments equally.
E. The first available $8,000 would go to Newman. The next $4,000 would be split equally between Dancey and Newman. The following $12,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $24,000 before all four partners share any further payments in their profit and loss sharing ratios.
B. The first available $16,000 would go to Newman. The next $12,000 would go $8,000 to Dancey and $4,000 to Newman. The following $32,000 would be shared by Dancey, Reese, and Newman. The total distribution would be $60,000 before all four partners share any further payments in their profit and loss sharing ratios.
Which of the following will not result in the termination and liquidation of a partnership?
1) Partners are incompatible and choose to cease operations.
2) There are excessive losses that are expected to continue.
3) Retirement of a partner.
A. 1 only
B. 1 and 2 only
C. 2 and 3 only
D. 3 only
E. 1, 2, and 3
E. 1, 2, and 3
What accounting transactions are not recorded by an accountant during partnership liquidation?
A. The conversion of partnership assets into cash.
B. The allocation of gains and losses from sales of assets.
C. The payment of liabilities and expenses.
D. The initiation of legal action by creditors of the partnership.
E. Writeoff of remaining unpaid debts.
D. The initiation of legal action by creditors of the partnership.
Which of the following statements is false concerning the partnership Schedule of Liquidation?
A. Liquidations may take a considerable length of time to complete.
B. Frequent reporting by the accountant is rarely necessary.
C. The Schedule of Liquidation provides a listing of transactions to date, current cash, and capital balances.
D. The Schedule of Liquidation provides a listing of property still held by the partnership as well as liabilities remaining unpaid.
E. The Schedule of Liquidation keeps creditors and partners apprised of the results of the process of dissolution.
B. Frequent reporting by the accountant is rarely necessary.
What is the preferred method of resolving a partner’s deficit balance, according to the Uniform Partnership Act?
A. Partners never have a deficit balance.
B. The other partners must contribute personal assets to cover the deficit balance.
C. The partnership must sell assets in order to cover the deficit balance.
D. The partner with a deficit balance must contribute personal assets to cover the deficit balance.
E. The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities.
D. The partner with a deficit balance must contribute personal assets to cover the deficit balance.
